Debt Ceiling Battle Fatigue Spawns Last Ditch Plan

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Republicans are bashing Senate Majority Leader Harry Reid’s $2.7 trillion deficit reduction plan as a gimmick-laced political document that would achieve far less in savings than the Democrats are claiming. But if House Speaker John Boehner’s alternate proposal fails to House approval—a growing possibility in light of mounting conservative opposition -- then Reid is hoping that some pragmatic Republicans might be willing to give his last-ditch plan a second look.

House Republicans delayed by at least a day a floor vote on their package to raise the debt ceiling, the latest challenge confronting Boehner and GOP leaders as they try to avoid a default on the nation’s debt. The decision to move the vote to Thursday or later came after the non-partisan Congressional Budget Office reported that the plan would reduce the deficit by only $850 billion over the next decade, far less than the speaker’s goal of $ 1 trillion in budget and spending cuts.

Reid, D-Nev., told reporters Tuesday that his proposal for cutting spending and raising the debt ceiling is “The best shot we have in Congress” to find a “reasonable middle ground” to slow the rate of growth of the deficit. The plan, he said, meets the two major demands of Republican leaders, by excluding any tax increases and matching dollar for dollar cuts in spending with an increase in the Treasury’s borrowing authority. Senate Minority Leader Mitch McConnell, R-Ky., has endorsed the Boehner plan and criticized Reid’s plan for containing “highly suspect spending reduction features.” House and Senate Republicans in particular have derided the $1 trillion of the savings Reid is claiming by factoring in the expected troop withdrawals from Iraq and Afghanistan that President Obama has announced.

When pressed by reporters to explain what he would do if the Boehner approach flounders in the House or gets knocked down in the Senate, McConnell replied, “We need to get an outcome” to avoid a potentially disastrous first-ever default on U.S. debt. “We’re going to have to get back together and get a solution,” McConnell said. “I’m willing to accept something less than perfect because perfection isn’t doable.”

Negotiations over a debt reduction plan essential to winning congressional support for raising the $14.3 trillion debt ceiling by next Tuesday’s deadline appeared to be spinning dangerously out of control, following nationally televised speeches last night by Obama and Boehner essentially blaming each other for the financial crisis.

Boehner sought to rally support for his plan, originally scheduled for a vote on Wednesday on the House floor. Meanwhile, Reid declared the proposal would be “dead on arrival” in the Senate and the White House issued a veto threat.

On top of that, Boehner has to control restless conservatives and Tea Partiers who won’t accept any plan that raises the debt ceiling or that doesn’t fall along the lines of the “Cut, Cap and Balance” proposal passed by the House last week. The chairman of the Republican Study Committee, Jim Jordan, R-Ohio., said he was “confident” there are not 218 Republicans in the House to support Boehner’s plan. Already, a handful of conservative think tanks in Washington have come out against the proposal and are urging lawmakers to vote against it. The conservative revolt may cause the Speaker to retool his proposal to meet their demands. He can only afford to lose 23 votes for his plan to pass the House chamber.

“I think that the House knows that the approach they are taking is unacceptable to the president,” White House budget director Jacob “Jack” Lew told MSNBC. “I don’t believe that it can pass the United States Senate. And I think that the Congress is going to have to work on sending the president a compromise, because it’s not going to come to that. That bill is not going to come to the White House.”

Boehner’s plan includes an immediate increase in the debt ceiling of up to $1 trillion – just enough to get the Treasury through the remainder of this year – and would cut discretionary spending by $1.2 trillion over the coming decade. A new, joint House-Senate committee of 12 lawmakers would then be instructed to come up with an additional $1.8 trillion of deficit savings over 10 years by late this year, receiving fast-track powers to guarantee up-or-down votes on their legislative product should they produce a plan that wins at least seven votes in their special committee. The framework also implements a Balanced Budget Amendment to the U.S. Constitution by requiring the House and Senate to vote on the measure after October 1, 2011 but before the end of the year. It would then be sent to the states for ratification.

If such a plan were approved, Obama early next year would be able to request up to $1.5 trillion of additional borrowing authority, which Congress would only be allowed to block by a super-majority vote of disapproval. If not, then the White House and Congress would be back in crisis mode, trying to find another way to extend the Treasury’s borrowing authority in the middle of the 2012 election campaign.

Robert Greenstein of the left-leaning Center on Budget and Policy Priorities warns that the Boehner plan would require deep cuts in the years immediately ahead in Social Security and Medicare benefits for current retirees, the repeal of health reform’s coverage expansions, or major cuts in social safety net programs. “The plan is, thus, tantamount to a form of ‘class warfare.’’ Greenstein said. “If enacted, it could well produce the greatest increase in poverty and hardship produced by any law in modern U.S. history.”

He said that’s because the first round of cuts will hit general government agencies, personnel and programs hardest, through the imposition of austere discretionary spending caps By the time Congress begins the second round of deficit reduction, he said, discretionary cuts will largely be off the table and virtually all of the $1.8 trillion of additional savings would have to come from entitlement programs, including Social Security and Medicare.

Reid’s counter proposal of $2.7 trillion in deficit reduction would allow Congress to raise immediately the debt limit through 2012. The Reid plan includes $1.2 trillion of cuts in discretionary spending for domestic and defense programs, $100 billion in savings in mandatory programs other that Medicare, Medicaid or Social Security benefits, $1 trillion in savings from winding down the wars in Iraq and Afghanistan and $400 billion of savings in interest on the federal debt.

Republicans have sharply criticized Reid’s use of the savings from the drawdown of U.S. troops from Iraq and Afghanistan as a budget gimmick, even though it would be scored as a savings by CBO.

The Reid bill includes upfront spending cuts that would exceed the size of the proposed increase in the debt ceiling. The Democratic plan would also establish a joint congressional committee to propose additional cuts, and that group’s recommendations would be guaranteed an up or down Senate vote, without amendments, by the end of this year.

Washington Editor and D.C. Bureau Chief Eric Pianin is a veteran journalist who has covered the federal government, congressional budget and tax issues, and national politics. He spent over 25 years at The Washington Post.